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Social Security For 20-Somethings Lacks Security

15 May 2008 No Comment

There has been a good bit of debate over the Social Security program in recent years. Bush made an unsuccessful attempt to reform a few years back. Whether you are a Bush fan or hate him, my opinion is, at least Bush is trying to do something to fix the program.

My cynical view of our political system was completely reinforced when Bush, while delivering a State of the Union address several years ago, referred to the unsuccessful passing of his social security reform. The entire left side of the chamber stood up and cheered. At first I dismissed it as the usual left vs right nonsense; however, then I thought about it some more. After further review, I realized that an entire group of politicians (some of the biggest names in the game) just stood up and cheered the fact that nothing was done to fix a HUGE problem.

As an American in your 20s, you need to understand the Social Security system. You need to understand how the system is going to fail you. Why? Because you have a vote that might influence policy in this country, and you have a retirement that you must provide for, by yourself.

The following information was taken from a BusinessWeek article:

The Social Security program is a “pay-as-you-go” system. Money paid in by current taxpayers is spent to pay benefits to current retirees. As the ratio of current workers to current retirees drops, fewer people will be paying into the system as a larger number makes withdrawals. In addition, people are living much longer than when the program first began in the 1930s, and this stretches out the payments that millions of Americans will be receiving.

What About the Social Security Trust Fund?

Many people believe that the money taken from their paychecks goes into a “trust fund” and remains there earning interest until the person that paid the money into the system retires and begins to take it back. This vision of a trust fund is a myth.

Tax income is deposited on a daily basis and is either exchanged for a government IOU or invested in government-issued Treasury bonds. In both cases, the cash goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund. Politicians spend the cash, relying on future generations of taxpayers to make good on the IOUs and to repay the principal underlying the Treasury bonds. As the number of retirees increases and the number of workers declines, repayment of the IOUs and bond principal will be necessary in order to meet the payments owed to retirees. That development is expected to occur in 2017, and the system is projected to become unable to meet its obligations around 2042, despite the repayments. The “trust fund” exists only as an accounting model, not as an actual funded account.

What Is Being Done to Fix the System?

Despite much political posturing, little is being done to address the problems with the Social Security system. Social Security was designed as an income supplement; it was not designed to replace 100% of a worker’s salary. Unfortunately, a large percentage of senior citizens rely on Social Security for all or a majority of their retirement income.

Because current retirees make up such an enormously active voting block, and current workers hope to retire someday, politicians feel that changing the system will hurt their chances for re-election or otherwise stunt their careers. Former Speaker of the House Tip O’Neill referred to Social Security as the “third rail of politics. Touch it and you die!”

Will There Be Any Money Left When I Retire?

The general consensus is that the U.S. government will not let the Social Security program fail. However, that does not mean that the program will be maintained in its existing state. Legislators have already increased the eligibility date for receipt of full benefits from age 65 to age 67 for citizens born in 1960 or later. Additional increases in the age of eligibility, reductions in benefits, or both, are likely to be necessary in order to get the program back on solid footing. Raising taxes to fund the system is another likely course of action.

What This Means For You

If you understand the above information regarding Social Security, it should be pretty clear: your retirement is up to you and only you. I am in my 20s and anything I receive from the government during my retirement years will be viewed as a bonus. I am expecting nothing, and I will continue to tell as many people as possible that your government is failing you. Moreover, the politicians representing the government are too short-sighted and selfish to do anything beneficial for the long term health of our country. If any action requires short term controversy, then no action is better than controversial action, because then they might compromise the one thing they care about: re-election.

Unfortunately, our senators and congressman only care about getting re-elected. They do not care about the fact that Social Security will not be around for our generation.

What You Can Do About It

First, I recommend you tell your friends and peers about the urgency of the situation. Nothing will change until enough of our generation stand up and demand a change. Unfortunately, our generation has a great deal of political apathy.

Second, it is imperative that you begin your retirement plan now. Nobody is going to look out for your future except you. A good starting point is the 20s Money Retirement Plan.

I hope this article has helped you accomplish two things.  For one, I hope it has shed some light on the reality of Social Security and its grim future.  Lastly, I hope I have encouraged you to take control of your future and not depend on anyone else, especially the government.  Remember, your future can be as bright as you make it.

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